The EU executive and the ECB want a pan-European system in place by 2008 so that people can use payment cards and direct debits and transfer cash across borders as cheaply and quickly as for their domestic transactions.
The European system would replace national systems by 2010, serving more than 300 million customers and 20 million firms. Banks have begun working on how to make a single euro payments area (SEPA) a reality by the two deadlines.
Despite some encouraging progress, we are still a long way from the SEPA goal of integrating retail payments in the euro area, an ECB executive board member, Gertrude Tumpel-Gugerell, told a banking conference.
Banks have worried about the costs of creating a new pan-European payments infrastructure and fear that new institutions offering payments services would enjoy lighter regulatory burdens than banks.
Research consultancy TowerGroup has estimated SEPA spending might exceed 8 billion euros ($9.3 billion) within the next six years, while another consultancy, Capgemini, has said price cuts due to SEPA efficiencies will cut bank revenues by 13-29 billion euros.
The Commission is due to publish proposals to remove barriers to a single payments area across the whole 25-nation EU. Switching to pan-European electronic invoicing, for example, would save customers 50-100 billion euros a year, the Commission says.
National central banks would consider taking a more active role if banks failed to deliver SEPA properly and create one effective pan-European system, Tumpel-Gugerell said.
She said the banks plan for direct debits was a long way from meeting standards set by the best national schemes, and a review of their credit card proposal was still incomplete.
However, some pressure should be applied for a timely completion of the review, she said. Commission official David Deacon said that in cases where the best payments solutions were not being offered or maximum economic efficiencies reaped, Brussels would intervene.